Strategy Decay Metrics

Strategy decay metrics measure the decline in a trading strategy's performance over time. All strategies eventually lose their edge as market conditions change, competitors adapt, or the underlying inefficiency is exploited away.

By tracking metrics like Sharpe ratio decay, profitability trends, and trade frequency, traders can identify when a strategy has stopped working. In crypto, where market cycles are compressed, strategy decay can happen rapidly.

Recognizing this decay early allows for timely intervention, such as re-optimization, hedging, or decommissioning the strategy. It is a vital component of lifecycle management for any quantitative system.

Ignoring decay often leads to continued losses as the strategy blindly applies outdated logic to a new market reality. Proactive monitoring is essential for sustained trading success.